- Bullish share in the SWFX market is back to 45%
- 57% of traders see the Euro higher in 50-pip range from the current market price
- Key resistance at 1.0954 is immediately strengthened by 100-day SMA at 1.0975
- Daily MACD and SAR indicators are bullish, while AROON and Alligator give a "sell" signal
- Economic events to watch in the next 24 hours: Spanish Retail Sales (Dec) and Unemployment Rate (Q4); Swedish Unemployment Rate (Dec); German CPI (Jan); ECB's Weidmann Speaks; US Durable Goods Orders (Dec), Pending Home Sales (Dec) and Unemployment Claims (Jan 23)
In line with expectations, the Fed kept interest rates on hold and said that it was closely following global economic and financial developments. Nevertheless, the US central bank gave no hints that it was changing course on its rate-hiking path ahead. Fed policy makers still argued that the world's number one economy was on track for moderate growth and a stronger labour market even with gradual rate lifts. However, Fed officials acknowledged inflation was estimated to stay "low in the near term" due to the further drops in energy prices, while the US economy's growth slowed late last year. The Fed kept its belief that the ongoing declines in energy prices was transitionary and would pass in the medium term. Yet, the central bank downgraded its view on household spending and business investment growth from "strong" to "moderate". The Fed hiked the federal funds rate in December for the first time in nine years and signalled it was determined to increase it by one percentage point in 2016. However, the actual path of rate hikes will depend on "the economic outlook as informed by incoming data". The central bank will gather again on March 15-16, while Fed Chairwoman Janet Yellen will testify to Congress about the outlook for the US economy and interest rates on February 10-11.
The Reserve Bank of New Zealand said it may need to slash interest rates further as persistently plunging oil prices and a weaker global growth outlook is likely to keep low inflation for longer. The central bank left its interest rate unchanged at 2.5%, after cutting four times in 2015. In December, when the RBNZ slashed the official cash rate back to an all-time low 2.5%, the central bank said that it expected the reach its inflation target at the current interest rate settings. However, last week's data showed the annual inflation change eased to just 0.1%, the weakest in more than 15 years, whereas the RBNZ targets annual inflation of between 1%-3%. Plunging prices for dairy products, New Zealand's biggest export, have also dented economic growth. Financial markets are now pricing a 64% chance of a rate cut by June, compared with 26% at the beginning of the year. However, RBNZ Governor Graeme Wheeler has been reluctant to cut rates further as Auckland's property boom spreads, posing a threat to financial stability, and as economic growth shows signs of rebounding from a mid-year dip. Wheeler said there are many risks surrounding the outlook, including the prospects for global growth, particularly relating to China, as well as market conditions. The central bank will be also monitoring dairy prices, immigration and developments in the housing market.
Upcoming fundamentals: German consumer prices to slump in January amid oil
A renewed drop in oil prices will likely put a substantial negative pressure on consumer price in Germany, the Europe's largest economy. Analysts see the monthly indicator, which will be published at 13:00 GMT, at -0.8% in December following a small decrease of 0.1% in November. Annual inflation, however, is expected to pick up from 0.3% to 0.4%. Alongside, President of Bundesbank and ECB Governing Council member Jens Weidmann is going to speak in Bonn at 18:00 GMT. As for other upcoming fundamental news from the region, the Swedish labour market statistics will come out at 8:30 GMT. Unemployment rate is projected to grow in December to 6.4% from 6.2% in the preceding month. Thus, some pressure and volatility is foreseen for the EUR/SEK cross today.
EUR/USD ticks higher after Fed meeting
A dense and difficult resistance cluster ahead of the spot makes the mid-term bearish scenario much more likely than the bullish one. Short-term volatility can be positive for the Euro, with gains having a chance to be extended up to Dec-Jan downtrend and 100-day SMA at 1.0954/75. If it gets no bearish correction from here, then EUR/USD will be estimated to fail near 200-day SMA at 1.1053. Bears are determined to retake a Dec-Jan uptrend around 1.0840, followed by current January lows near 1.0715. A long-term focus is on the Dec low at 1.0521, as assumed by aggregate weekly/monthly indicators.Daily chart
Mild losses during Asian session on Thursday have not eroded the possibility of continuous growth of the EUR/USD cross. It can be supported by 200-hour SMA at 1.0869, with another demand placed within the 1.08-1.0830 zone. Bulls are watching a two-month downtrend marginally below 1.0960, followed by January uptrend at 1.0990.
Hourly chart
Short-range pending orders spike above 50%
In the meantime, EUR/USD's market sentiment at OANDA continues to be the least positive among major currency pairs, as only 41.7% (41% yesterday) of all their clients are betting on the Euro's increase in value. Alongside, 66% of SAXO Bank traders are bearish, as they have traditionally been more skeptical on this currency pair.
Spreads (avg,pip) / Trading volume / Volatility
68% of Dukascopy Community members are now looking for losses of the Euro vs US Dollar
This week the overall sentiment on the EUR/USD cross deteriorated again. The majority of Dukascopy Community members are now waiting for the Euro to decrease, even though the opposite sentiment had been observed a week before. The average prediction for February 1 is located around the 1.08 level.
Among traders, Blacklightning assumes that a lot will depend on the European Central Bank. He says that "Draghi sends a signal of potential easing in March. In the short-term I would expect EUR/USD to reach levels between 1.04 and 1.032. I also expect that the ECB will postpone further easing during March meeting, as it is too early to act and stock markets will fall further after the brief rebound. Therefore, for this calendar year I see EUR/USD not below 1.03 and, as result of stock market decline, as high as 1.20-1.22."